GLOBE LIFE INC

Note 1—Significant Accounting Policies

Business:(Globe Life), (the Company), refers to Globe Life Inc., an insurance holding company incorporated in Delaware in 1979, and Globe Life Inc. subsidiaries and affiliates. Globe Life Inc.'s direct or indirect primary subsidiaries are Globe Life And Accident Insurance Company, American Income Life Insurance Company, Liberty National Life Insurance Company, Family Heritage Life Insurance Company of America, and United American Insurance Company. The underwriting companies are owned by their ultimate corporate parent, Globe Life Inc. (Parent Company).

Globe Life provides a variety of life and supplemental health insurance products to a broad base of customers. The Company is organized into three reportable segments: life insurance, supplemental health insurance, and investments.

Globe Life markets its insurance products through a number of distribution channels, each of which sells the products of one or more of Globe Life's insurance segments. Our distribution channels consist of the following exclusive agencies: American Income Life Division (American Income), Liberty National Division (Liberty National) and Family Heritage Division (Family Heritage); an independent agency, United American Division (United American); and our Direct to Consumer Division (DTC).

Basis of Presentation: The accompanying condensed consolidated financial statements of Globe Life have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all of the disclosures required by accounting principles generally accepted in the United States of America (GAAP) for annual financial statements. However, in the opinion of management, these statements include all adjustments, consisting of normal recurring adjustments, which are necessary for a fair presentation of the condensed consolidated financial position at March 31, 2025, and the condensed consolidated results of operations, comprehensive income, and cash flows for the periods ended March 31, 2025 and 2024. The interim period condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements that were included in the Form 10-K filed with the Securities Exchange Commission (SEC) on February 26, 2025.

Use of Estimates: The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. See further documentation in the significant accounting policies or the accompanying notes.

Reinsurance and Recapture: In the normal course of business, Globe Life insurance subsidiaries will enter into reinsurance agreements to limit their exposure to the risk of loss as well as enhance their capital position. The Company entered into a coinsurance transaction with funds withheld agreement with a third-party reinsurer on March 6, 2025, with an agreement effective date of January 1, 2025. Under the terms of the agreement Globe Life ceded 100% of the liabilities, net of existing reinsurance, associated with certain term and whole life insurance policies. The contract will be accounted for under deposit accounting as it did not pass the risk transfer requirements for reinsurance treatment on a GAAP basis. Since the agreement is subject to deposit accounting and meets the right of offset conditions outlined in the accounting policy the Company recorded the initial coinsurance, ceding commission and funds withheld balance on a net basis. At inception, no cash was exchanged between the parties and subsequently, a risk charge was recorded as a component of net investment income in the Condensed Consolidated Statement of Operations, with net cash settlements occurring quarterly between the parties.

On March 31, 2025, the Company entered into a recapture and termination agreement with a third-party reinsurer to recapture certain policies that had previously been ceded under a reinsurance agreement dated November 12, 2001. The recapture was executed to accomplish common objectives between the Company and the reinsurer. As a result of the transaction, the Company received net proceeds of $39 million, which are reflected as operating cash flows in the Condensed Consolidated Statement of Cash Flows. The Company also recognized a gain of approximately $14 million in policy holder benefits in the Condensed Consolidated Statement of Operations.

Note 2—New Accounting Standards

Accounting Pronouncements Yet to be Adopted: ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, adds disclosure requirements to disaggregate information related to the effective tax rate reconciliation and information on income taxes paid. The disclosures will enhance the assessment of an entity’s operations and related tax risks.

This standard is effective for the Company for annual periods beginning on January 1, 2025, and will be implemented on a prospective basis. The Company does not expect the standard will have a material impact on the condensed consolidated financial statements. The guidance requires only additional disclosure, as a result there will be no effects on our financial position, results of operations or cash flows.

ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, adds disclosure requirements to disaggregate information related to an entity's income statement. The disclosures will allow for enhanced transparency of an entity's expenses.

This standard is effective for the Company for annual periods beginning on January 1, 2027. The Company is evaluating the standard.

Note 3—Supplemental Information about Changes to Accumulated Other Comprehensive Income

Reclassification Adjustments: Reclassification adjustments out of accumulated other comprehensive income are presented below for the three month periods ended March 31, 2025 and 2024.

Note 4—Investments

Portfolio Composition: Summaries of fixed maturities available for sale by amortized cost, fair value, and allowance for credit losses at March 31, 2025 and December 31, 2024, and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) are as follows. Redeemable preferred stock is included within "Corporates, by sector."

(1)Amount reported in the balance sheet.

(2)At fair value.

(1)Amount reported in the balance sheet.

(2)At fair value.

The Company had unfunded commitments of $155 million and $167 million in fixed maturities at March 31, 2025 and December 31, 2024, respectively.

The Company has exposure to real estate investment trusts with an average rating of BBB+, which had a fair value of $397 million (2% of the total fixed maturity portfolio) and $405 million (2% of the total fixed maturity portfolio) at March 31, 2025 and December 31, 2024, respectively.

A schedule of fixed maturities available for sale by contractual maturity date at March 31, 2025, is shown below on an amortized cost basis, net of allowance for credit losses, and on a fair value basis. Actual disposition dates could differ from contractual maturities due to call or prepayment provisions.

Analysis of Investment Operations: "Net investment income" for the three month periods ended March 31, 2025 and 2024 is summarized as follows:

(1)For the three months ended March 31, 2025 and 2024, the investment funds, accounted for under the fair value option method, recorded $19.2 million and $18.9 million, respectively, in net investment income. Refer to Other Long-Term Investments below for further discussion on the investment funds.

Selected information about sales of fixed maturities available for sale is as follows:

(1)As of March 31, 2025 and 2024, the Company had $0 million and $0 of unsettled trades, respectively.

An analysis of "realized gains (losses)" is as follows:

(1)During the three months ended March 31, 2025 and 2024, the Company recorded $55.7 million and $66.9 million of issuer-initiated exchanges of fixed maturities (noncash transactions) that resulted inno realized gains (losses) in either period.

Fair Value Measurements: The following tables represent the fair value of fixed maturities measured on a recurring basis at March 31, 2025 and December 31, 2024:

The following tables represent changes in fixed maturities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

(1)Includes capitalized interest, foreign exchange adjustments, and principal repayments.

(2)Considered to be transferred at the end of the period. Transfers into Level 3 occur when observable inputs are no longer available. Transfers out of Level 3 occur when observable inputs become available.

(1)Includes capitalized interest, foreign exchange adjustments, and principal repayments.

(2)Considered to be transferred at the end of the period. Transfers into Level 3 occur when observable inputs are no longer available. Transfers out of Level 3 occur when observable inputs become available.

The following table presents changes in unrealized gains and losses for the period included in accumulated other comprehensive income for assets held at the end of the reporting period for Level 3 classification:

Transfers between levels within the hierarchy occur when there are changes in the observability of the inputs and market data. Transfers into Level 3 occur when there is little unobservable market activity for the asset/liability as of the measurement date and the Company is required to rely upon internally-developed assumptions or third parties. Transfers out of Level 3 occur when quoted prices in active markets becomes available for identical assets/ liabilities or the ability to corroborate by observable market data.

The following table represents quantitative information about Level 3 fair value measurements:

(1)Unobservable inputs were weighted by the relative fair value of the instruments.

Private placement fixed maturities and asset-backed securities are valued based on the contractual cash flows discounted by a yield determined as a treasury benchmark rate adjusted for a credit spread. The credit spread is developed from observable indices for similar securities and unobservable indices for private securities or private comparable securities for corresponding credit ratings. The credit ratings for the securities may be considered unobservable inputs, as they are private letter ratings issued by a nationally recognized statistical rating organization or are assigned by the third-party investment manager based on a quantitative and qualitative assessment of the credit underwritten. A higher (lower) credit rating would result in a higher (lower) valuation.

The collateral underlying the collateralized debt obligations consists primarily of trust preferred securities issued by banks and insurance companies. Collateralized debt obligations are valued at the present value of expected future cash flows using an unobservable discount rate. Expected cash flows are determined by scheduling the projected repayment of the collateral assuming no future defaults, deferrals, or recoveries. The discount rate is risk-adjusted to take these items into account. A significant increase (decrease) in the discount rate will produce a significant decrease (increase) in fair value. Additionally, a significant increase (decrease) in the cash flow expectations would result in a significant increase (decrease) in fair value. For more information regarding valuation procedures, please refer to Note 1—Significant Accounting Policies under the caption Fair Value Measurements, Investments in Securities disclosed in the Form 10-K.

Unrealized Loss Analysis: The following table discloses information about fixed maturities available for sale in an unrealized loss position.

Globe Life's entire fixed maturity portfolio consisted of 2,571 issues by 1,018 different issuers at March 31, 2025 and 2,552 issues by 1,014 different issuers at December 31, 2024. The weighted-average quality rating of all unrealized loss positions at amortized cost was A- as of March 31, 2025 and December 31, 2024.

The following tables disclose unrealized investment losses by class and major sector of fixed maturities available for sale at March 31, 2025 and December 31, 2024.

Analysis of Gross Unrealized Investment Losses

Gross unrealized losses may fluctuate quarter over quarter due to factors in the market that affect our holdings, such as changes in interest rates or credit spreads. The Company considers many factors when determining whether an allowance for a credit loss should be recorded. While the Company holds securities that may be in an unrealized loss position from time to time, Globe Life does not generally intend to sell and it is unlikely that the Company will be required to sell the fixed maturities prior to their anticipated recovery or maturity due to the strong cash flows generated by its insurance operations.

Analysis of Gross Unrealized Investment Losses

Fixed Maturities, Allowance for Credit Losses: A summary of the activity in the allowance for credit losses is as follows.

As of March 31, 2025 and December 31, 2024, the Company hadone fixed maturity security in non-accrual status with an amortized cost of $5.5 million and an allowance of $3.3 million.

Mortgage Loans (commercial mortgage loans): Summaries of commercial mortgage loans by property type and geographical location at March 31, 2025 and December 31, 2024 are as follows:

The following tables are reflective of the key factors, debt service coverage ratios, and loan-to-value (LTV) ratios that are utilized by management to monitor the performance of the portfolios. The Company only makes new investments in commercial mortgage loans that have a LTV ratio less than 80%. LTV ratios that exceed 80% are generally a result of decreases in the valuation of the underlying property. Generally, a higher LTV ratio and a lower debt service coverage ratio equates to higher risk of loss.

(1)Annual net operating income divided by annual mortgage debt service (principal and interest).

(2)Loan balance divided by stabilized appraised value at origination, including planned renovations and stabilized occupancy. Updated internal valuations are used when a loan is materially underperforming.

(1)Annual net operating income divided by annual mortgage debt service (principal and interest).

(2)Loan balance divided by stabilized appraised value at origination, including planned renovations and stabilized occupancy. Updated internal valuations are used when a loan is materially underperforming.

As of March 31, 2025, the Company had 36 loans in the portfolio. During the quarter, the Company evaluated the commercial mortgage loan portfolio on both an individual and pooling basis to determine the allowance for credit losses and determined five loans were collateral dependent or likely to foreclose. The allowance for credit losses on thefive loans was determined using the practical expedient which was based on an estimate of fair value of the underlying collateral plus costs to sell the asset. The total principal balance of thefive loans was $50.4 million and the allowance for these loans using the practical expedient was $3.2 million as of March 31, 2025. During the quarter, one loan with an outstanding principal value of $3.5 million was removed from the evaluation as a result of foreclosure. Additionally, there were three commercial mortgage loans in the process of foreclosure, with an outstanding par value of $42.2 million and outstanding interest due of $1.9 million as of March 31, 2025. For the three months ended March 31, 2025, the allowance for credit losses decreased by $913 thousand to $6.7 million. The provision for credit losses is included in "Realized gains (losses)" in the Condensed Consolidated Statements of Operations.

As of March 31, 2025, the Company hadfour commercial mortgage loans in non-accrual status with a principal balance of $49 million. As of December 31, 2024, the Company hadfive commercial mortgage loans in non-accrual status with a principal balance of $53 million. The Company's unfunded commitment balance to commercial loan borrowers was $21 million as of March 31, 2025.